Wednesday, August 27, 2014

Pacific Coast v. Malibu Boats - The Nightmare Apportionment Scenario Realized

Last Friday we commented on Professor Lemley's amicus brief in the Apple v. Samsung case, which addresses the issue of apportionment in design patent law.   Apparently,  Judge John Antoon II of the Middle District of Florida was working on his own "post" on design patent apportionment at the same time.  Last Friday, Judge Antoon issued a decision denying Malibu's motions for summary judgment, including a motion to limit potential damages to the profits for the accused windshields in the case of Pacific Coast Marine Windshields, Ltd. v. Malibu Boats, LLC.  As a result of Judge Antoon's decision Malibu's total profits for the sale of its speedboats will be at risk if they are found to have infringed Pacific Coast's design patent on a boat windshield.  

Here's a graphic to help explain the decision:

You might recall this case from its previous trip to the Federal Circuit, where the court reversed Judge Antoon's decision to apply prosecution history estoppel to limit Pacific Coast's claims against Malibu. While the Federal Circuit held that prosecution history estoppel applies to design patent, the court reversed the district court’s summary judgment of non-infringement because it found that the accused design was not within the scope of the subject matter surrendered during prosecution.

It is unclear why Malibu Boats did not renew its motion for summary judgment on remand.  Although its prosecution history estoppel argument had been defeated, it still had strong non-infringement arguments as a result of the Federal Circuit's decision.  For example, if, as the Federal Circuit says, the accused windshield was not within the scope of the canceled figure,  then how could the accused windshield be within the scope of the remaining figures of the '070 Patent?  The accused design appears to be more similar to the cancelled figure than the asserted design, and that fact might have been enough for Judge Antoon to grant summary judgment. 

Malibu's decision not to renew its motion for summary judgment on non-infringement may cost them. Judge Antoon's decision on Friday was a simple matter of statutory interpretation.  The court found that its hands were tied in light of the statutory history of § 289:

Congress removed the apportionment requirement in 1887, with the enactment of what later became§ 289.  [See Nike. Inc. v. Wal-Mart Stores. Inc., 138 F.3d 1437, 1441 (Fed. Cir. 1998)]. Design patent owners are no longer required “to apportion the infringer's profits between the patented design and the article bearing the design.” Id. at 1442.  The intent of Congress to allow more expansive recovery for design patent owners is exhibited in the plain language of the statute, which allows recovery of "total profit" from anyone who sells “any article of manufacture to which such design or colorable imitation has been applied.” 35 U.S.C. § 289.  In this case, Malibu sells boats, to which patented windshields have been applied. The plain language and intent of the statute support a conclusion that Pacific is entitled to Malibu's profits from the sale of its boats with the windshield.
This reading of § 289 is further supported by Federal Circuit and district court decisions. In Nike, the Federal Circuit referred to the damages as profits from "the infringing shoes" when the patent involved only part of the shoe. 138 F .3d at 144 7. In Apple. Inc. v. Samsung Electronics Co., the plaintiff had several patents pertaining to smartphones and tablet computers that claimed a portion of the design of particular electronic devices but disclaimed other portions. 678 F.3d 1314, 1317 (Fed. Cir. 2012). With respect to damages based on the defendant's profits, the district court ruled that the plaintiff was not required to prove which portions of the profits were earned by the design feature. Apple. Inc. v. Samsung Elecs. Co., 926 F. Supp. 2d 1100, 1111 (N.D. Cal. 2013). "Congress specifically drafted the design patent remedy provisions to remove an apportionment requirement that the Supreme Court had imposed. Thus, there is simply no apportionment requirement for infringer's profits in design patent infringement under § 289." Id.
While Judge Antoon's legal analysis is correct, the case of Pacific Coast v. Malibu Boats is a striking example of the sometimes inequitable result of § 289 in the absence of any equitable discretion in the hands of the Court.  Malibu's boats sell for anywhere between $50,000 and nearly $100,000, while the accused windshields cannot possibly cost more than a few hundred dollars, standing alone.  This is precisely the type of inequitable scenario that Professor Lemley highlighted in his amicus brief and is the type of situation that the Federal Circuit must grapple with in the appeal from the Apple v. Samsung case. 

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